Online advertising: Google faces antitrust allegations

Karen Dunn has a lot on her plate. The lawyer is helping US Vice President Kamala Harris prepare for a televised debate with former President Donald Trump as part of her presidential election campaign. Dunn is also defending her client Google before a US federal district court against serious antitrust allegations: Google is said to have hindered competition.

The proceedings initiated by the US government and several US states entered the courtroom phase in the US Federal District Court for Eastern Virginia on Monday. Four weeks have been set aside for this. The plaintiffs accuse Google of manipulating the market for online advertising for years, buying up potential competitors and taking other measures to prevent competition in all parts of the online advertising chain. Google's market share is over 90 percent, according to the complaint filed at the beginning of 2023.

This market power harms both advertisers, who have to pay too much, and the operators of the websites and apps on which the advertising runs, who receive too little money for it. In between, Google profits and takes an average of 35 percent in the form of several fees. Dunn denies illegal behavior on behalf of Google.

Not the size, but the behavior

"Google is not here (in court) because it is big", said Julia Tarver Wood, the lead attorney for the US government in the case, in her opening statement on Monday, "It is here because it has used that size to crush competition." Google dominates the online advertising market at least threefold: through Google Ads in software for advertisers, through the advertising exchange Google AdX, and on the side of website and app operators through the ad server DFP (Doubleclick for Publishers).

This in itself is not illegal. The question is how Google has acquired these market shares, what means it uses to defend them, and whether Google has abused its dominance in one market to gain advantages in another market. That would be illegal. The plaintiffs' allegations include that Google favors itself in its advertising exchange and thus engages in a kind of insider trading with online advertising space, that it improperly links the use of the actually separate DFP and AdX offerings, and that it has allegedly kept Meta Platforms, the most dangerous competitor in the online advertising market, at bay through an anti-competitive pact.

Serious error in 2007

Google's dominance is largely due to takeovers, above all that of Doubleclick. The problem for the plaintiffs: US authorities had the opportunity to fight this deal in court in 2007, but failed to recognize the problem: "After a careful review of the evidence, we have determined that Google's proposed acquisition of Doubleclick is not likely to reduce competition," the Federal Trade Commission (FTC) erred at the time. Now the court is to turn back the clock and force Google to sell the AdX advertising exchange, the DFP advertising server and the Google Ad Manager service.

The data company naturally wants nothing to do with this, as it generates billions every month with these services. Dunn offered unsurprising arguments on Monday: There are enough other providers, he said, but customers would prefer Google's services because they are better. As is familiar from political debates, Dunn also came up with whataboutism: The lawsuit wrongly focuses on advertising on websites, he said, whereas advertising activity today takes place particularly on social networks and smartphone apps.

The case is called USA et al v Google and is pending in the US Federal District Court for Eastern Virginia under case number 1:23-cv-00108. It is not to be confused with an antitrust case of the same name pending in the U.S. District Court for the District of Columbia under case number 1:20-cv-03010. That court has already determined that Google's search engine operations are illegal, but has not yet decided what remedies it will impose.

Allegations of abuse of an advertising monopoly, including insider trading in online advertising space and the formation of a kind of cartel with Facebook, are the subject of another lawsuit that has been pending in the US Federal District Court for Eastern Texas since the end of 2020. The original plaintiffs are the governments of Texas and nine other US states, which accuse Google of countless willful violations of competition and consumer protection laws. The proceedings are due to enter the courtroom phase next March. Meanwhile, other governments have joined the lawsuit (Texas et al v Google, Ref. 1:21-cv-06841).

• Complaint USA v Google regarding online advertising in general

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